Diesel surge squeezes truckload margins as rail offers 30% cost saving

A sharp rise in diesel costs is eroding the benefit of stronger truckload pricing, while widening the cost advantage available to shippers switching freight from road to rail, FreightWaves reported. Results from J.B. Hunt, Werner and Heartland Express show fuel, driver and insurance expenses absorbing revenue gains, despite contract rates rising 18% year on year.

According to FreightWaves, diesel averaged $6.37 a gallon in October, against $3.70 a year earlier, an increase of 72%. Prices reached about $6.53 in late September and were 27% higher than in July. The report said further contract rate increases would be needed for carriers to preserve margins. A Sonar DTS index reading close to a five-year high also pointed to a tight driver market, adding recruitment and onboarding costs before any wage increases.

J.B. Hunt’s third-quarter operating revenue increased 24%, supported by pricing, an 8% rise in intermodal loads and higher brokerage volumes. Net earnings, however, advanced just 1%. In the FreightWaves update, Julie Van de Kamp attributed the gap to driver-related spending, fuel and insurance claims. Werner separately flagged approximately $0.18 a share in combined cost pressures from fuel and driver recruitment and retention.

Heartland reported an operating ratio of 98.7, deteriorating from the second quarter but improving substantially from the previous year’s third quarter. Its management cited rising fuel costs alongside inflation in maintenance, repairs and employee-related expenses. FreightWaves said the carrier was looking towards 2027 for contract pricing increases sufficient to counter those pressures.

The relative economics favour intermodal: the Sonar Intermodal Cost Savings Index indicated a 30% saving against highway transport. J.B. Hunt described that advantage as more than twice the level seen in some previous markets. Its intermodal revenue rose 20%, but an 11% increase in revenue per load narrowed to just 2% excluding fuel. Scarce drayage capacity at both ends of rail journeys is restricting conversion from road.

Other indicators underline the capacity constraints. FreightWaves reported Sonar’s STRI at 13.5%, up 5.6 percentage points year on year, while the loaded outbound rail index for 53-foot containers increased 10%. J.B. Hunt’s brokerage revenue climbed 57% on 22% higher load volumes, although personnel and insurance expenses also reduced the benefit.